Rates, new loan limits, Fed rate cut, builder optimism, refi volume, and existing home sales

Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update. Want to be giving you a quick reminder as well that coming up next month on Monday, October 14th, that is a holiday. It's Columbus Day and Indigenous People's Day. And as a federal holiday, there will not be able to be any closings that day. So Make sure you're taking that into account when you're looking at writing your closing dates into contracts and offers and just factoring in timeframes for next month. As far as interest rates go, slightly up this week, 6.15% last week on average to 6.17% this week. And a lot of questions around that are going to get into, well, the Federal Reserve cut interest rates a half a percent. What's going on there? I'll get into that in just a second here. But also some great news for higher loan limits. Even though we ordinarily get announcements near the end of the year, as far as what the loan limits for conventional and FHA are going to be increasing to, a lot of lenders will preemptively start allowing higher loan limits before the end of the year. We're starting to see that now. And so I don't know if— I don't think all lenders are doing it, but I have several of my outlets right now that have currently allowed higher conventional loan limits. So they've gone up from a single family of $766,550 for a conventional loan now to $802,650 for single family. For a duplex, it's going up to $1,027,750. For a 3-unit, it's $1.242 million. And then a 4-unit, so a 4-plex on a conventional loan, allowable up to $1.543 million loan amount and still maintaining conventional. And the cool part about this as well is, remember, Since about a year, year and a half ago, conventional is now allowing 5% down for owner-occupied multifamily purchases. So if you have somebody, even a first-time homebuyer, buying a fourplex, they can buy a $1.5 million fourplex with 5% down and count the estimated rental income from the other units they won't be occupying to help qualify for that property. So again, great opportunity there if you're not already aware of that and talking to your clients about it. Use that It's a great resource, especially in higher cost areas. Now, the thing that we, of course, have all been seeing and talking about, the Federal Reserve cut interest rates half of a percent. So why aren't mortgage rates lower? Well, the misnomer on this one, especially because they were only expecting a quarter of a percent cut, and then of course, they ended up cutting it half a percent. That doesn't have a direct impact on mortgage rates. Now, a lot of news outlets and a lot of media is getting this wrong where they're saying, oh, Federal Reserve cuts the rates half a percent. Sites like HousingWire are posting things, making it kind of implied that it's cutting mortgage rates. But here's the thing, mortgage rates have already dropped in anticipation of the cut. When the cut actually happened, mortgage rates didn't drop at all. In fact, some lenders repriced higher as a result. Now, the reason for that is because mortgage rates are already factoring in what's expected to happen into the future. They don't respond just to the news, but the expectation of the news. And so in this case, because it was pretty well expected that the Federal Reserve was going to cut their rates, the moment that became more definite after the Jackson Hole meeting in Wyoming for the Federal Reserve about a month or two ago, that's when mortgage rates started going lower already. So are rates lower because of the cut? Yes, but not just because of the day they started going lower. And we've seen that improvement over the last month. So moving forward though, the things that are going to be directly impacted by that rate cut are things like credit cards, car loans, home equity lines of credit, those types of things. And then also adjustable rate mortgages are going to be based off of the Federal Reserve rate. So when you're talking with your clients or posting information out there, just make sure you're aware the Federal Reserve didn't lower mortgage rates half of a percent. Next up here, the September NAHB Homebuilder Index for optimism rose 4— 2 points, excuse me, to 41, which is the first improvement we've seen in 6 months. Remember, anything below 50 signals contraction, anything above 50 signals expansion. So even at 41, we're still in the contraction area. We are starting to see more optimism from builders getting closer to that breakeven point. The biggest change was future expectations. Which that index rose 4 points to 53, which is again the first time it's been above 50 into the expansion territory in significant amount of time. The NAHB chairman attributed the increased optimism to lower interest rates, but noted that the cost of construction still remains high and competition will grow as increased inventory from sellers who previously didn't want to sell because market rates were too high compared to where they were locked in more and more of them are going to start putting homes on the market, especially as we do see interest rates going lower. So the discrepancy between their current rate and the new rate isn't going to be as high. For housing permit starts and completions, we all saw those get an increase in August. Single-family starts rose 16% and permits rose 5% for the month. Next up, the MBA, Mortgage Bankers Association, reported that purchase loan volume was up 5% last week. Refinances due to lower rates were up 24% and are now up 127% higher year over year for refinances. Refinances made up 51% of all loan applications last week and are up 47%, up from 47% from the prior, prior week. So again, there was a time refinances were down to maybe 15-20% of all mortgage applications or less. So as this is increasing, lower mortgage rates are going lower. Something to be on the lookout is even though purchases might not be as strong, you're going to see some refinancings clogging up underwriting times for some lenders, maybe backing up appraisals a little bit more, and just generally lowering the level of service you might get for your purchase clients. This is not something that is going to happen with me and my team. Purchases are our priority. So just be aware out there that all of a sudden, you know, if you don't get that quick response time from the loan officers that you're used to, probably because they're putting a lot of the priority and effort and attention into those refinances right now. So again, our team absolutely dialed in. We have extreme amount of capacity. And so yes, we can help with refinances, but purchases are always going to be the priority. So we're here for you, whatever you need. And lastly here, existing home sales for the month of August fell 2.5%, which did come in below estimates. Now, July was revised higher slightly, so that made the drop in August look a little bit more significant. Still would have come in somewhere around 2 to 2.2% below, uh, a drop month over month is still below estimates, but not as much as it would have been without the July revision higher. Year-over-year existing home sales are down 4.2%. Inventory rose 0.7% for the month to 1.35 million units nationally on the market, which equates to a 4.2-month supply. As always, hopefully this is helpful for you. If you think anybody else would benefit from this, feel free to pass it along. There's a link they can subscribe down below if they want to get it on a regular basis. And again, hope you have a phenomenal weekend. We'll see you next time. Take care.